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Canadian Startups Look to Reverse Their “Sellout” Trend

UPDATE:It is worth noting that this 2012 case study on a company in British Columbia, Mobile Data International, and its CEO Barkley Isherwood, attracted the ire of followers of Werner Erhard, prominent San Francisco New Age cult leader, with similarities to L. Ron Hubbard, founder of Scientology. It is a lens into New Age cults at that time. In the same way that Scientology reacts to attacks on itself. Erhard’s followers attacked this post in a frenzy of irrational hatred.

I can only hope that this is a serious effort to reverse this national problem of short-term thinking.

I have seen the problems with Canadian investors first hand, and have the following case study to share here.

Many light years ago, I worked for a pioneering wireless data company, Mobile Data International, in Richmond, BC. I thought this company was so promising, I came from the UK to join it. Regrettably, the Board of Directors and the Canadian investors were more interested in making a quick profit than in building the company to potentially be the company that established itself as a global leader in wireless data. The CEO of MDI, Barclay Isherwood, was an avid follower of California new-age guru, Werner Erhard aka Jack Rosenberg, of erhard seminars training, better known as “est”. Erhard’s career has been marked by allegations, controversy, and legal disputes. Leading academics have raised serious questions about Erhard’s qualifications, his businesses, and the highly authoritarian style of his organizations.

Finding that MDI was influenced by Erhard was a supreme irony. Years before, while in university in the San Francisco Bay Area, my housemate also became infatuated with Erhard. My housemate eventually quit university and joined “est” as one of Erhard’s trusted senior lieutenants. I got to see “est” up close and very personally. I was browbeaten by my friend, who tried to convince me how important it was to take “the training” as they called it, at a price I could not afford. I was disturbed enough by what I saw from outside the cult, that nothing altered my view that est was extremely dangerous. Since that time, Erhard has run from his critics, and reincarnated himself and “est” into a new group called “The Forum.”

Isherwood was spending company money to have Erhard’s people “hang out” at MDI, and he kept his girlfriend, Evi Truu on the payroll, supposedly reporting to me, but via “pillow talk” apparently also reporting to Isherwood himself. The Board took no action, employees were asking questions among themselves, and morale was suffering. I invited Intel’s legendary Marketing VP, Bill Davidow to MDI for a speaking engagement. I was flabbergasted to be told that no one liked Davidow, as he was too “arrogant.” Ironically, their description of Davidow was exactly backward. The company was floated on the Toronto exchange much too early, and as a consequence, MDI was eventually sold for a relative pittance to Motorola Canada in a hostile takeover. Isherwood has tried to take credit for selling out to Motorola as if it were a victory for him, but the truth is that he snatched defeat from the jaws of victory.

The investors made a modest return, but Canadian investors don’t seem to think like Silicon Valley. In a strikingly similar startup situation in Silicon Valley, the CEO, actually an Intel sales organization alumni, had become infatuated with the alleged “supernatural powers of crystals” and his belief system became part of the company culture. The investors quickly became deeply concerned about their investment and their fiduciary duty. The question was, “How could this have happened?” and “We need to move to fix this immediately or face consequences.” My former Intel boss, Barry Cox, was brought in by the Board of Directors to fire the CEO, take drastic action and turn the company around. Obviously, nothing like this happened with MDI.

In the years since I have also seen offers in California in the hundreds of millions turned down flat, and million dollar cheques were thrown back across the table. The MDI employees were mostly laid off and MDI’s doors were eventually shuttered. The MDI building, an excessively elegant structure that would have raised eyebrows in California, sat idle in Richmond for 20 years, until it was finally leased again as the security headquarters, ringed in barbed wire, for the 2010 Olympics.

Let’s hope that this new realization of the need to build innovation in Canada strikes a chord and that Canada doesn’t repeat the mistakes that occurred at Mobile Data International.

I am not interested in debates with “true believers” in Werner Erhard, and he was not the primary focus of my post. Erhard remains to this day a magnet for controversy. To that point, the only responses to my post have been about my peripheral reference to Erhard. The topic and business ethics question in the post, is imposing Erhard and his “minders” in a corporate environment where employees have no choice but to demure, and the Board turning a blind eye to nepotism and spending large amounts of company $$ on The Forum. Do you have an “on topic” question? If not, I am not interested in providing a forum for proselytizing Erhard.

BTW, I had intimate exposure to Erhard personally at events at his former home on Franklin street in San Francisco, and to one of Erhard’s top lieutenants at that time, who was one my college roommates. Until his tragic death, Richard Aikman was instrumental in Erhard’s success among the well-heeled in southern California. In addition, as a graduate in speech-communication, I believe I am qualified to comment on Erhard’s persuasion techniques and communication ethics. Imagine my shock and surprise to find a “reinvented” Erhard twenty years later in Vancouver, after being “outed” in San Francisco.

The problem with start ups is they tend to have investors with absolutely no understanding of the business model, usually those who aim to make a quick buck themselves and are all too ready to pull the plug before the ball is even rolling.
It is interesting you mention The Forum because I think that it started about 40 years ago, isn’t it still going? Maybe the $$ were being invested in the right place after all?

Thank you for your comments on my post from Techvibes on the problem of Canadian start-ups selling out too early in their corporate life-cycle, depriving Canada of innovation and economic growth. I agree with you regarding unsophisticated investors. Your observation is also shared by many technology venture capitalists in Canada. A promising trend is partnering between Silicon Valley and Canadian VC’s. For example, Yaletown Ventures here is partnered with Granite Ventures in San Francisco, in an effort to improve the situation.

I was referring Landmark Forum formed in 1985, the reincarnation of Werner Erhard’s “est,” by many of the same “est” executives. As with “est,” Wellspring, and other such “human potential” organizations, The Forum has been the subject of much scrutiny in the media, claims that it operated like a cult, and people claiming they were psychologically damaged by The Forum. My experience at MDI was that many employees were uncomfortable with the Forum “minders,” fearing their direct contact and influence with the CEO, and that it was an invasion of their privacy. My issue and question is one of business ethics with employees, and the failure of corporate governance to deal with it.

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David Mayes

Founding Partner, Vendange Partners, UBC adjunct faculty, Intel alumni, technology assessment, international business, clean tech, fly fisherman, native Californian and citizen of France, who has been very fortunate to have traveled, lived and worked all over the globe. My wonderful wife, Isabelle has reintroduced me to my French Provencal heritage.